In London, the next wave of Bitcoin growth will be led by startups and innovation

On the 39th floor of one of London’s tallest office buildings — chock full of bankers in dark suits, and overlooking the mighty Thames — a group of entrepreneurs, investors, analysts and the media came together this week to talk about a more alternative form of financing: the controversial cyber currency called Bitcoin. Perched above the heart of London’s financial sector, there were very few institutional bankers and investors in the room, according to event organizer and Hummingbird Ventures Partner, Pamir Gelenbe, who noted: “I don’t think the financial services sector at large has caught onto Bitcoin yet.”

However, even if Europe’s financial capital isn’t quite taking Bitcoin seriously, it doesn’t mean they aren’t paying attention to it — and it’s hard not to. Particularly in recent weeks, when there’s been a flow of news showing how Bitcoin seems to be slowly becoming more respectable and potentially more liquid. And there’s also the fact that the total value of all Bitcoins passed the billion-dollar mark at the end of March (see our Bitcoin primer here).

But at Bitcoin London this week, it was clear that it would be the next wave of innovative startups that might be able to eventually move Bitcoin from an experimental currency into a more mainstream financial force in London. The event highlighted some of the bigger Bitcoin startups, which have launched exchanges or apps, as well as newer players, like a Bitcoin conversion machine maker, which is looking to install its first box in the Fall.

Older startup OpenCoin, and its distributed payment network Ripple — which are sometimes described as Bitcoin copycats, but which Ripple co-developer Stefan Thomas explained as software that sits between Bitcoin and financial institutions — is a prime example of a company trying to use innovation to help legitimize cyber currencies across the world. OpenCoin announced at the event that it is launching a new feature in Ripple called Bitcoin Bridge, which makes it possible to pay any Bitcoin user straight from Ripple, with money going in as traditional currency and coming out as Bitcoin.

The feature allows people to convert hard currency into Bitcoin as needed, and makes it more viable for merchants to accept Bitcoin.

Other startups like newcomer Lamassu Bitcoin Ventures — a company that makes a Bitcoin Machine that can turn regular currency into Bitcoins — could make the barrier to entry for buying bitcoins a lot lower. If you’ve never bought Bitcoins, this is the fastest, easiest way to do it, said Lamassu Bitcoin Venture’s co-founder Zach Harvey. Hummingbird Venture’s Gelenbe called the Bitcoin Machine “a fantastic way to get into Bitcoin.”

Innovation around Bitcoin seems to be of particular interest to those in London’s tech startup scene who are focused on the financial services sector: so-called fintech firms. Bitcoin London was held in the fintech accelerator Level39. GigaOM has been ramping up its coverage of the London tech startup scene and we’re throwing our annual cloud and data event, Structure:Europe, in London in September (we’re looking for startups to join us, too).

Britons in general seem more keen on Bitcoin and, for those that have heard of the cyber currency, 40 percent of them trust Bitcoin as much as British sterling, according to a recent survey. That’s compared to 16 percent of those in the U.S. who are aware of Bitcoin and say they trust it more than the dollar.

Bitcoin entrepreneurs at Bitcoin London resoundedly said that the U.S. was actually an unusually difficult place to launch and scale a Bitcoin startup. Erik Voorhees, CEO of Coinapult, which enables users to exchange Bitcoins via text and email and is based in Panama City, said: “The U.S. has some of the most arcane financial regulations in the world.” Jered Kenna, CEO of Bitcoin exchange TradeHill said that in order for TradeHill to become complaint in the U.S. they’ve needed eight attorneys. “We have more attorneys than coders,” said Kenna.

But startups are still looking to innovate with Bitcoin in the U.S., particularly because the Valley’s venture capitalists are getting into the Bitcoin wave. Ripple’s Thomas said he recently got a U.S. visa based on his expertise in Bitcoin (seriously), and the startup is backed by well known investors like Google Ventures, Andreessen Horowitz, and Founders Fund. Fred Wilson from Union Square Ventures — who’s been a sage of the social sector — also led a $5 million investment in Coinbase, a Bitcoin exchange.